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Technology sharing and tacit collusion

  • Levy, Nadav
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    I study the prospects for collusion between rival firms that share technological know-how. Two common forms of technology sharing are compared: a research joint venture (RJV) and licensing. Under licensing, firms can use the licensing fee to elicit higher levels of R&D than with an RJV. However, firms must also be induced to license innovations ex post. For a broad set of cases, licensing yields higher collusive profits to firms and higher prices to consumers. In other cases, licensing can only be induced through a very high license fee, leading to excessive R&D and lower profits. In these cases, the colluding firms prefer to share technology through an RJV.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0167718711000816
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    Article provided by Elsevier in its journal International Journal of Industrial Organization.

    Volume (Year): 30 (2012)
    Issue (Month): 2 ()
    Pages: 204-216

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    Handle: RePEc:eee:indorg:v:30:y:2012:i:2:p:204-216
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505551

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    1. Brodley, Joseph F, 1990. "Antitrust Law and Innovation Cooperation," Journal of Economic Perspectives, American Economic Association, vol. 4(3), pages 97-112, Summer.
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    6. Rotemberg, Julio J & Saloner, Garth, 1986. "A Supergame-Theoretic Model of Price Wars during Booms," American Economic Review, American Economic Association, vol. 76(3), pages 390-407, June.
    7. Baumol, William J, 1992. "Horizontal Collusion and Innovation," Economic Journal, Royal Economic Society, vol. 102(410), pages 129-37, January.
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